Car Tax

tax formThe tax you must pay* to use a motor vehicle on public roads

Excise Duty on motor vehicles was introduced way back in 1920 when local councils were first required to register all vehicles. The new tax was based on engine horsepower and was initially hypothecated (ring-fenced) for road building and maintenance – it was paid directly into the ‘road fund’ and was therefore known as the Road Fund Licence. Tax discs were introduced in 1921.

Since 1936 Vehicle Excise Duty has been treated as general taxation and has not been hypothecated for road building and maintenance. The road fund continued, funded by government grants, until it was abolished in 1955.

So while it might have been appropriate to refer to it as Road Tax or the Road Fund Licence before 1936, this has not been the case since.

Car tax/Vehicle tax/Vehicle Excise Duty/VED is simply a tax that must be paid to obtain a tax disc before you can use a motor vehicle on public roads.

You can buy or renew your tax disc online if:

  • You’re the registered keeper
  • DVLA has the correct details
  • You have the reminder or the V5C registration document
  • The vehicle is insured
  • The vehicle has an MOT (if more than three years old)

If you’re buying a car then the dealer should be able to obtain a new tax disc on your behalf if there’s not a current disc on the car.

Based on CO2

Automobile_exhaust_gasThe current system of Graduated VED, with the rate based on official CO2 emissions data for the model, was introduced in March 2005 and applies to all cars first registered since 1 March 2001.

There are currently 13 VED bands ranging from band A (up to 100g/km CO2) for which the annual charge is £0, up to band M (over 255g/km CO2) for which the annual charge is £490. Clearly there are savings to be made by checking which VED band applies before you buy a car and choosing a car in a lower band.

Showroom tax

A new first year rate of VED, widely referred to as a showroom tax, was introduced on brand new car purchases from April 2010 – the rate of VED reverts to the standard rate at the end of the first year following first registration.

The Showroom tax is intended to encourage purchase of cleaner, more fuel efficient cars and discourage purchase of more polluting, less fuel efficient cars.

  • For cars in VED bands A to D (up to 130g/km CO2) the first year rate is £0
  • For cars in VED bands E, F and G (131-165g/km CO2) the first year rate is the same as the standard rate.
  • For cars in bands H to M the first year rate is higher than the standard rate, rising to £1065 for a car in band M.

Cars first registered before 23 March 2006

Band K (201-225g/km CO2) includes cars with a CO2 figure above 225g/km that were first registered between 1 March 2001 and 23 March 2006.

Cars first registered before 1 March 2001

Older cars are taxed by engine size with one rate for cars with an engine size above 1549cc and a lower rate for engines of 1549cc or below.

SORN

If you don’t use or keep your vehicle on the public road you don’t have to buy a tax disc but must instead make a SORN – Statutory Off Road Notification.

*Unless your car is zero-rated

 

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